BOOK REVIEWS

Industrial Relations: Two Points of View Harold Crouch

Industrial Relations: What Is Wrong with the System? An Essay on Its Theory and Future by Allan Flanders; Faber and Faber, 1965; pp 63, 12s 6d.

Industrial Relations: A Point of View by G Ramanujam; Indian National Trade Union Congress, 1965; pp 127, Rs 5.

IN the past the study of industrial relations has been treated 25 an

off-shoot of economics, law and other disciplines. It has not been treated as a separate discipline in itself. Instead of a general theory of industrial rela­tions we have had empirical studies of particular aspects of industrial rela­tions in particular circumstances. Allan Flanders, who is a senior lecturer in industrial relations at Oxford, has felt the need to approach his discipline from a more theoretical point of view, and after creating a theoretical frame­work, he examines the industrial rela­tions system operating in Britain, identities certain changes that have taken place in recent times, and makes some predictions and recommendations for the future.

Without going into descriptive de­tail, Flanders points to three essential principles which have constituted the spirit of the British system of indus­trial relations. It is not so much the institutions of the system as such, as the spirit in which the system actually operates, that distinguishes one system from another.

The first principle is that of a preference for collective bargaining for the settlement of disputes. As Flan­ders points out, collective bargaining "did not rise like a phoenix out of the ashes of individual bargaining" (p 22) but developed to suit historical cir­cumstances. In Britain it was found (hat governmental control of industrial relations in the earlier stages of indus­trialisation "was far too inflexible to suit a dynamic industrial society" (P 22).

A second major principle distinguish­ing the British system is its preference for voluntary procedural rules for collective bargaining. Unlike collec­tive bargaining as practised in the United States, the system in Britain "his provided little work for lawyers" (p 23). Agreements are kept because it is in the interest of the parties to keep the agreement not because of any legal force behind such agree­ments, and if an agreement is broken, the parties themselves must settle the question again. The system depends

very heavily on the continued recogni­tion of a mutual interest in settling disputes without the intervention of the state.

The British system is further dis­tinguished by an emphasis on proce­dure as opposed to substance. The parties seem less concerned with obtaining "justice" than with reaching a workable compromise through the accepted machinery. In the U S A , the emphasis is on the substance of the agreement, wages, hours, and so on, whereas in Britain it seems that it is enough that an agreement he reached.

It is Flanders' central thesis "that the principles of any national system of industrial relations. .. are derived from the values by which the nation judges and legitimizes the system's working and results" (p 30). The values which have determined the British system are a belief in economic freedom and a desire for industrial peace.

However, since the second world war changes have been taking place in the system, partly because other values are being added to the tradi­tional two. The system is consequent­ly in a. stale of flux, being affected by an increasing recognition of the role of government in promoting economic development, and by the tendency for the shop stewards in the factory to take on certain negotiating functions that had previously been in the hands of the national union leaders.

The "challenge from above", that of increased governmental intervention in the economy and, as a result, in indus­trial relations, must inevitably alter the traditional system of collective bargaining. Flanders believes that it is essentially because of Britain's recur­ring balance-of-payments crises rather than any theoretical case for an in­comes policy, that the post-war govern­ments at first tried to introduce some measure of "wage restraint" or "plan­ned growth of wages" as the Labour Party now prefers to call i t . The adoption of a national incomes policy, which has been supported by both the previous Conservative and the present

Labour government, must necessarily restrict the scope of traditional cob lective bargaining.

The power of the national unions in collective bargaining and the success of the government's incomes policy are both undermined by the "challenge from below". With full employment the workers in a particular work-place have gained sufficient bargaining strength to negotiate with their own management-. One consequence of this is an increase in "unofficial strikes", conducted without the sanction of the top leadership of the union; another consequence is the "earnings drift" which can seriously affect any planned wage policy. Full employment and even labour shortages have enabled shop stewards in particular factories to negotiate for wage payments above those agreed on after industry-wide collective bargaining. In 1959 it was estimated that average earnings were 26 per cent higher than the rates agreed on by collective bargaining at the industry level. In addition an in­crease in overtime widened the gap further between actual earnings and negotiated rates of payment.

How can the traditional system of collective bargaining at the national-industry level adjust itself to the recognised need for economic planning including the planning of wage levels? Flanders has identified the problem but has been unable to provide anyth­ing but generalities for a solution (for which he can hardly be blamed, as the problem is just about insoluble). Each side must accept the need for econo­mic growth and an incomes policy. Planning of wage movements must necessarily be "indicative" if the good­will of both sides is to be kept, but, as Flanders accepts. "Probably some breaches will not he avoided" (p 33). Flanders seems to be reduced to a plea that management and unions should each adopt a more long-run approach and more responsible methods, and that the government should encourage them in this. The success of the in­comes policy will apparently depend more on the personal qualities of in­dustrial leaders than on any basic institutional changes.

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July 28, 1965 T H E E C O N O M I C W E E K L Y

The problems of industrial relations in a country like India have only a superficial resemblance to the situation in countries like Britain. If the under­lying values of the British system have been economic freedom and industrial peace, the central requirements in India have been rapid economic growth and the maintenance of politi­cal stability. These requirements have resulted in a system of industrial relations based on government control. The government actively works to secure industrial pence, partly because strikes hinder economic development and very largely because the develop­ment of a strong, militant trade union

Asia's Dismal Export Prospects G C da Costa

Trade Prospects for Developing Countries by Bela A Balassa; Richard D Irwin, 1964; pp xii + 450.

IN this bock Bela Balassa examines, in considerable detail, the trade

problems of developing countries. These problems are examined both in retrospect — 1928 to 1960 — as well as in perspective — 1960 to 1975. The study has been divided into two parts. In the first, the trade patterns of less developed areas arc examined and the following aspects receive at­tention : (1) exports and economic growth in the developing countries; (2) economic growth in the develop­ed countries; (3) future of exports from the developing countries; (4) import requirements of the developing countries and the consequent trade gap; (5) current account gap and alternative policies that can fill the gap. In the second part, the prospects for individual commodities have receiv­ed somewhat detailed consideration.

Balassa finds that during the years 1928-1955, the exports of the develop­ing countries grew at a rale consider­ably below that of the GNP of the developed countries — an 88 per cent increase in the GNP of the developed countries was accompanied by a 38 per cent increase in the volume of their imports. This, of course, does not suggest any uniformity during the period. For example, whereas between 1928 and 1918 export growth into the developed countries was only slightly lower than the latter's GNP the gap widened considerably from 1938 to 1955. In this latter phase a 68 per cent increase in GNP was accompanied by a 27 per cent increase in the ex­ports of the less developed countries. The explanation is to be found in the

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movement represents a potential threat to political stability.

In addition to setting up machinery to regulate industrial relations the Congress government has also encour­aged the growth of the Indian National Trade Union Congress, the present general secretary of which is G Ram­anujam. Ramanujam's, book of essays is not meant to be a scientific analysis of the Indian system of industrial rela­tions. Its interest lies less in any intrinsic merit than in the fact that it authoritatively sets out the INTUC position on a wide variety of topics.

Like most Indian trade unionists,

policy measures introduced during the War and technological changes in production that have taken place since. The substitution process might also be said to have developed during this period. Thus, whereas there was no synthetic rubber production in 1938, in 1955 in the United Slates the share of natural rubber in rubber consumption had declined to 42 per cent and in Western Europe to 85 per cent. Similar was the case with other synthetic substitutes. However, in the period 1955-1961 the growth of the exports of the developing countries exceeded the growth of the GNP of the developed countries. It is of interest to note that about half the increase is accounted for by fuels. Mineral exports, in particular to Wesl-ern Europe, also showed some buoy­ancy. Manufactures fared well but their role in the aggregate was insigni­ficant as they accounted for only about 7 per cent of the aggregate ex­ports of the developing areas.

Future Trends

In order to estimate the future ex­port prospects Balassa has calculated the future trends in incomes in the developed regions: North America, Western Europe and Japan. Several variants of the income variable have been used. These are per capita dis­posable income, gross national product (total and per capita), industrial pro­duction and in the case of certain raw materials specific indicators regarding the individual industries. Two alter­native estimates have been used : (1) a 'most likely' estimate based on past

Ramanujam goes through the ritual of denouncing party-policies in trade unionism, but perhaps we can take him a little more seriously than most others, as he is not, in fact, a member of the Congress party. (This may, of course, be more a result of the appa­rently friendly relations between the Congress Government and the Hind Mazdoor Sabha in Ramanujam's home state of Madras, rather than any differ­ences in principle between Ramanujam and the Congress). While denouncing party-policies, Ramanujam does point out that trade unions must inevitably concern themselves with politics in the wider sense.

trends; (II) a high or optimistic esti­mate which could become a reality only if suitable economic policies were followed. Under the first assumption the projected increase in GNP is 80 per cent and under the second it is 96 per cent.

A detailed presentation of the con­clusions here is, of course, impossible and uncalled for. But a few highlights are revealing of the trends that might be expected. We shall concern our. selves only with the 'most likely' assumption. First of all, in overall terms, he finds that the exports of the developing countries at I960 prices would rise from $ 19.5 billion in 1960 to $ 29.1 billion in 1970 and $36.0 billion in 1975. This would yield an income elasticity of import demand, for the developed countries, exceeding unity. This he compares with the period 1953-54 to 1960-61 when the imports of the developed countries rose by 48 per cent as against the 31 per cent rise in their GNP. The ex­port prospects to Japan appear rela­tively the best. This is due to the special features of the Japanese eco­nomy; viz, earlier stage of development as compared with W Europe and the United States, lack of domestic sources of raw materials, in particular, minerals and the character of the Japanese diet. In Western Europe exports of fuel and minerals are expected to fare well. This is again due to the special features of the Western economy as compared with that of the United States: (a) the substitution process of liquid fuel for coal has been com­pleted in the United States whereas it